Spirit AeroSystems Holdings Inc (NYSE:SPR), a primary supplier of jet fuselages, is reducing its workforce by 400 to 450 employees at its Wichita, Kansas factory.
The layoffs are a response to a production deceleration at Boeing Co (NYSE:BA), Spirit's largest client.
"The recent slowdown in the delivery rate on commercial programs compels a reduction to our workforce in Wichita," Spirit stated.
Originally part of Boeing, Spirit AeroSystems has faced significant quality challenges with the 737 MAX jets, which has been central to their current struggles.
The Wichita facility, which employs about 13,000 workers, is the epicenter of these issues, according to a report from the Wall Street Journal.
The layoffs coincide with delays in Boeing's efforts to acquire Spirit due to ongoing negotiations between Spirit and Airbus SE (OTC:EADSY) regarding the control of Spirit's factories that manufacture parts for Airbus aircraft.
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Boeing executives believe acquiring Spirit is crucial for addressing their quality problems. Notably, the Wichita factory produced the fuselage involved in the Alaska Airlines (NYSE:ALK) incident in January, highlighting long-standing issues with defect management.
Last month, Boeing committed $425 million in advance payments to help Spirit cover quality-improvement costs.
Despite this, Spirit posted significant losses in the first quarter and hinted at potential financial market involvement to raise additional funds.
CEO Pat Shanahan mentioned that the company is currently losing money on parts production for Airbus's A350 and A220 jets, and negotiations with Airbus for higher prices have stalled.
Boeing has reduced its production rates amid regulatory examinations and efforts to resolve quality issues, resulting in a slowdown of parts orders to manage excess inventory.
Although Boeing aims to produce 38 737s per month later this year, current production rates remain lower. Spirit, on the other hand, is equipped to manufacture fuselages for 42 737s monthly.
Spirit AeroSystems stock has gained more than 24% in the last 12 months. Investors can gain exposure to the stock via SPDR S&P Aerospace & Defense ETF (NYSE:XAR) and IShares U.S. Aerospace & Defense ETF (BATS:ITA).
Price Action: SPR shares were trading lower by 0.55% at $30.82 at the last check on Friday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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